EXW Incoterm stands for EX Works, an international commercial rule published by the International Chamber of Commerce. Having an EXW arrangement means that there is minimum obligation for the seller, whereby he is responsible only till the delivery of goods at the named place, and the buyer covers the entire shipping cost.
EXW appears to be more in favor of the seller as he has no charges to pay once the goods have left the premises. However the buyer may have certain advantages, if he manages to reduce the transportation costs and handle the shipping process more efficiently.
Goods provided by the seller are mostly from his own factory/warehouse. He is obliged to prepare the goods for collection, after which the buyer will inspect and load the goods for transport.
This packaging terms include the checking, marking and packaging of goods in international trade. Seller has to ensure that the packaging is done in a manner which is approved for export, and has to do so at his own cost.
In the incoterm EXW, the seller has no obligation to help the buyer with loading and unloading, as he is only liable till delivering the goods at the specified place, which is usually his own warehouse. However the seller may load the goods, but at the buyer’s risk and cost.
Seller has to provide the buyer with following documents:
These are needed in situations where the seller is entitled to carry out the delivery process.
The seller has to deliver the goods at the named place, within the stipulated time frame. In conditions, where there is no mention of the named place then it can be assumed that the goods will be made available at the factory.
Because the seller is not involved in any activities related to the transportation of goods, he is not responsible for bearing freight charges. But at the buyer’s risk and cost, he may provide assistance to the buyer during the export process.
There is no obligation for the seller for clearing the goods in customs, as he has no role to play in the process of delivery and transportation. However if the buyer requests, the export clearance documents can be provided by the seller, but at the buyer’s risk and cost.
Seller has no obligation to provide any insurance cover. However, he may provide assistance to the buyer in arranging insurance cover for the goods while they are in transit, at buyer’s cost.
Buyer has to arrange transport of goods from the seller’s factory to his own factory. He has to take care of loading goods from the seller’s factory and then complete the shipping process and finally unload goods at his factory.
There can be few exceptions to the term such as the seller providing invoice or labelling/marking of goods, but in addition to that, the buyer has no obligation for packaging of goods.
As the procedure is carried on by the buyer the loading and unloading of goods at all stages rests with the buyer.
Seller provides proof to the buyer, as goods are arranged by him. The seller may provide documentation to the buyer such as quality product, license, certifications, receipts, and more.
Delivery point in the process of ex works is seller’s factory, so the buyer’s pickup and delivery starts from the place of origin. Stages involve pick up from factory, delivering to port, shipping process, and then getting it delivered at his own warehouse.
Buyer has almost full control over shipping and transport activities. He is responsible for paying the truck charges, ocean freight charges and shipping charges. Further, he is also responsible for all the future costs associated with delivering the goods.
As the whole process is carried out by the buyer, he has to pay for custom duties and bear all import and export charges.
Risk of goods is buyer’s responsibility. Any damage of goods during the process will be borne by the buyer. So the decision of insuring goods rests with the buyer, and he may or may not insure the goods accordingly.
The quotation for Ex works is mostly calculated by the buyer to reduce the value, i.e., added cost imposed by sellers in the shipping process.
Ex Works transaction is often undertaken in situations where the buyer perceives that the shipping terms can be better handled by himself.
For instance, say Company A has 100 generators to export to Company B, wherein Company A charges $400 per generator, including the shipping cost, and quotes $300 without the shipping cost. Now if the buyer can arrange for a shipping cost lower than what company A is charging him, say at a minimum rate of $70, then he saves $30 for every generator and he can thus manage his cost of importing.
The buyer is responsible for all freight charges under ex works. The seller may carry out few carriage related responsibilities but only at buyer's risk and cost.
In ex works, for a seller the cost or price that he will quote to the buyer will be the price of goods as decided by him, and it may also include cost of shipping if the shipping procedure is being carried out by him as per the agreement between him and the buyer (the buyer has to pay him back the cost of shipping since its not his responsibility to cover it).
Since, in the process under ex works, the entire responsibility for moving the goods from the beginning itself rests with the buyer, he remains liable for export as well as import customs clearance procedures. The seller at buyer’s request/demand may pick up few customs clearance proceedings but again at buyer's risk and cost.